Apache Announces Huge Discovery in Permian

Good news in the oil and gas industry comes in dribs and drabs during this continuing, yet slightly improving downtime.

The dearth of upbeat happenings no doubt added to the excitement when Apache Corp. announced in early September that it had made a major oil discovery in the Delaware Basin, a sub-basin in the western portion of the famed oil-rich Permian Basin, which covers 86,000 square miles primarily in Texas.

Apache reported that the new play, dubbed Alpine High, is the result of two years of extensive geological and geophysical effort, methodical acreage accumulation and strategic testing and delineation drilling. The locale occurs in the southern part of the Delaware Basin, principally in Reeves County, Texas.

“While other companies have focused on acquisitions during the downturn, we took a contrarian approach and focused on organic growth opportunities,” said Apache CEO and President John J. Christmann IV.

“These efforts have resulted in the identification of an immense resource that we believe will deliver significant value for our shareholders for many years,” he emphasized.

The company’s effort to acquire mineral rights ultimately led to an assemblage of 307,000 contiguous acres at an average cost of $1,300 per acre. In contrast, current Permian prices can reach as much as $30,000 owing to the latest onslaught of speculative fever.

Good news in the oil and gas industry comes in dribs and drabs during this continuing, yet slightly improving downtime.

The dearth of upbeat happenings no doubt added to the excitement when Apache Corp. announced in early September that it had made a major oil discovery in the Delaware Basin, a sub-basin in the western portion of the famed oil-rich Permian Basin, which covers 86,000 square miles primarily in Texas.

Apache reported that the new play, dubbed Alpine High, is the result of two years of extensive geological and geophysical effort, methodical acreage accumulation and strategic testing and delineation drilling. The locale occurs in the southern part of the Delaware Basin, principally in Reeves County, Texas.

“While other companies have focused on acquisitions during the downturn, we took a contrarian approach and focused on organic growth opportunities,” said Apache CEO and President John J. Christmann IV.

“These efforts have resulted in the identification of an immense resource that we believe will deliver significant value for our shareholders for many years,” he emphasized.

The company’s effort to acquire mineral rights ultimately led to an assemblage of 307,000 contiguous acres at an average cost of $1,300 per acre. In contrast, current Permian prices can reach as much as $30,000 owing to the latest onslaught of speculative fever.

Estimated hydrocarbons in place on Apache’s acreage tally 75 trillion cubic feet of rich gas, or more than 1,300 BTUs, and three billion barrels of oil in a couple of zones alone.

In fact, Apache estimates that the field in its entirety could hold the oil and gas equivalent of as much as 8.1 billion barrels.

This specific locale in the Delaware Basin has long been overlooked for the most part with the belief that its clay-rich makeup would make it ill suited for hydraulic fracturing.

Permian Basin

The Permian Basin overall has been attracting innumerable oil finders since the original commercial oil well in the Basin was reportedly completed in 1921. This marked the discovery of Westbrook, the area’s first large oil field. Westbrook was followed by a series of high profile discoveries, including the Yates field in 1926 and the Wasson and Slaughter fields in 1937.

Despite its long and prolific history, the Permian has endured its share of bad times when activity languished sufficiently to turn it into a kind of sleeping giant harboring more than 100 billion barrels of oil in place, according to the U.S. Geological Survey.

Annual production from the Basin hit a low point of 850,000 bopd in 2007.

It slowly reversed course to reach 1,350,000 in 2013, the U.S. Energy Information Administration noted.

Persisting Permian

In past years as the industry has developed new and enhanced technologies, including improved horizontal drilling and ever more sophisticated hydraulic fracturing techniques, multiple-stacked pay zones, such as in the Delaware for example, have become readily accessible — and profitable — targets.

When a well completion encompasses two or more formations, resulting in commingled production, the payoff can be significantly better than the usual one-off completion.

The beckoning formations at Alpine High include the popular operator-favorite Bone Spring and the underlying Wolfcamp, along with the Mississippian-age Barnett and the late Devonian/early Mississippian Woodford.

Commingle the Wolfcamp and Bone Spring and you have the Wolfbone.

New technologies and efficiencies will enable Apache to exploit the Alpine High field, which contains between 4,000 and 5,000 feet of stacked pay, according to the company.

Apache reported that as many as 2,000 to 3,000-plus future drilling locations have been identified just in the Woodford and Barnett. These target zones are in the wet gas window and are expected to produce a combo of rich gas and oil.

It’s estimated that well costs in development mode for a 4,100-foot lateral will tally about $4 million per well in normally pressured areas and $6 million in over-pressured conditions.

Drillbits already are turning, and today there are 19 wells in the play. Only nine of these are currently producing, and they’re churning out limited volumes owing to current infrastructure constraints in the area.

The producers include six wells in the Woodford formation, one in the Barnett and one each in the Wolfcamp and Bone Spring.